The ICE Regulations: part 2 - context and impact
The first part of our guidance note provided a detailed guide to the Information and Consultation of Employees Regulations 2004. In this second part, we examine where the Regulations sit in the wider information and consultation landscape, and offer an assessment of what the impact of the Regulations may be.
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Various species of the employer's obligation to inform and consult the workforce arise in a range of different factual contexts, including health and safety matters, redundancies, TUPE transfers and pensions. What follows is an examination of the many obligations that exist, and how they overlap with those created by the ICE Regulations. Consultation on training matters is not dealt with - readers are referred to Employee consultation (2): TUPE and other legal duties to consult. What several of the existing obligations have in common is that, where there is a recognised union, consultation is to be with that union's representatives. We begin with an examination of one such form of the obligation.
Collective and individual redundancies
An obligation to consult is imposed by the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A), as amended by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1995 and 1999. The latter Regulations came into force on 28 July 1999 and apply to all collective redundancy dismissals taking place after 1 November 1999. The provisions inserted into TURL(C)A are intended to implement the Collective Redundancies Directive 98/59/EC. A collective redundancy situation, triggering the application of these provisions, arises where 20 or more employees are to be dismissed as redundant within a 90-day period.
Employers are under no specific legal obligation to inform and consult employee representatives in cases falling below the 20 employees' redundancy threshold, but it is good industrial relations practice to do so. Further, by consulting individuals who are selected for dismissal on the grounds of redundancy, the employer also minimises the risk of being subjected to an unfair dismissal claim. In determining the fairness of a dismissal, the tribunal will ask whether the employer acted reasonably in treating the potentially fair reason (redundancy) as sufficient to dismiss in the particular circumstances of the case. A tribunal will go on to consider whether dismissal was within the band of responses that a reasonable employer could have adopted. Adequate warning and consultation before dismissal by reason of redundancy would be considered the behaviour of a reasonable employer. Therefore, despite the absence of a statutory requirement to consult in such circumstances, failure to do so adequately could taint the fairness of the dismissal.
The obligation to consult under s.188 of TULR(C)A is wide. The provisions apply to all employers and employees, except those employed for a fixed term of three months or less and anyone who is not an employee - for example, agency workers or independent contractors. The collective consultation and notification provisions in TULR(C)A 1992 apply to proposed dismissals, even if there is no intention to reduce the number of jobs. For instance, where an employer seeks to change the terms and conditions of employees by giving notice to terminate, then offering immediate re-engagement on new terms, the employer may still be under a duty to consult under s.188 (GMB v Man Truck & Bus UK Ltd; Hardy v Tourism South East). There will also be an obligation to consult employees who may be affected by the proposed dismissals, or by measures taken in connection with them, even though they themselves are not to be dismissed.
Where employees who may be affected by the proposed dismissals, or by measures taken in connection with them, are represented by an independent trade union recognised for collective bargaining purposes, the employer must inform and consult an authorised official of that union. In a multi-union company, all unions must be consulted. Where there are no recognised unions or there is a class of employees that does not form part of the bargaining unit, the employer must inform and consult those affected representatives also. The employer may consult:
In cases where there is no recognised union, and where affected employees fail to elect representatives (having had a genuine opportunity to do so), the employers concerned may fulfil their obligations by providing relevant information to those employees directly. It is the employer's responsibility to ensure that consultation is offered to appropriate representatives.
As with the ICE Regulations, the appropriate representatives are protected from detrimental treatment and dismissal relating to the carrying out of their functions. Under s.188 (5A) of TULR(C)A 1992, the employer must allow the appropriate representatives access to the affected employees and shall afford to those representatives such accommodation and other facilities as may be appropriate to carry out their function.
Sections 61 to 63 of the Employment Rights Act 1996 also entitle the employee to paid time off in order to perform his functions as a representative and in order to undergo training to perform such functions. However, they also allow election candidates to have time off. The rights to time off for representatives under the ICE Regulations are therefore somewhat inferior.
The "trigger" to begin consultation is contained in s.188(1A) of TURL(C)A 1992. It states that, in all cases, consultation must begin in good time. In cases of collective redundancies, the duty to consult is triggered when the employer "proposes" to dismiss as redundant. In MSF v Refuge Assurance plc, the EAT considered how the consultation obligations should be interpreted in the light of the Collective Redundancies Directive, which requires consultation to begin once there is a "contemplation" of collective redundancies. Mr Justice Lindsay stated that "contemplation" means "having a view" and refers to a relatively early stage in the decision making process, whereas "proposes" "relates to a state of mind which is more certain". The EAT therefore concluded that the domestic legislation could not be construed in accordance with the Directive without distorting the meaning of the domestic legislation, and confirmed that it simply required consultation to begin once the employer had specific proposals to make redundancies. The employer had done this, and the consultation engaged in was therefore "in good time". In terms of the Directive itself, the ECJ held recently in Junk v Kühnel that consultation must be complete before notice of redundancy is given, which may mean that consultation must be complete before the employer reaches the stage of "proposing to dismiss", rather than starting at this point. Public sector employees may be able to rely on the Directive directly, which is clearly more onerous, leaving different rules as to when redundancy consultation may begin for collective redundancies, depending on whether the employee is in the public or private sector.
Section 188(2) states that consultation, which must be "with a view to reaching agreement", must be about: (a) ways of avoiding the dismissals; (b) reducing the number of employees to be dismissed and; (c) mitigating the consequences of the dismissal. In Middlesbrough Borough Council v TGWU, the EAT clarified that these three features of consultation are disjunctive. Therefore, although the employer had consulted about (b) and (c) above, it had breached its statutory duty by failing to consult about (a).
Although the employer does not have to consult about its reasons for proposing redundancies, it must consult about whether redundancies can be avoided.
The consultation must be genuine and meaningful and not a sham. In order to allow the employee representatives to play a constructive part in the process, the employer must allow adequate time to respond to its proposal and disclose in writing:
The ICE Regulations follow in a similar vein (at reg. 2) and provide that consultation about decisions likely to lead to substantial changes in work organisation or in contractual relations, including collective redundancies, TUPE transfers and proposals to change terms and conditions, must be undertaken "with a view to reaching agreement", where the standard provisions apply. The DTI Guidance to the Regulations, published in January 2005, states that the consultation requirements imposed under the ICE Regulations are not supposed to be "collective bargaining". However, since the publication of that guidance, the ECJ has held that the requirement for consultation to be "with a view to reaching agreement" imposes an obligation to negotiate (Junk v Kühnel).
The employer can rely on the "special circumstances" defence laid out in s.188(7) of TULR(C)A 1992, where it is not reasonably practicable to comply with the provisions for information and/or consultation within the specified time frame. In such circumstances, the employer must do all that is reasonably practicable to meet the requirements. In the Middlesbrough case, the Council argued that its serious financial problems amounted to such "special circumstances". The EAT held that this did not absolve the Council from consulting on ways to avoid the dismissals, even if the employer felt that the additional consultation would be futile.
If an employer fails to comply with this obligations to consult, s.189 of TULR(C)A 1992 provides that a tribunal may order a protective award covering a period which is considered to be just and equitable by the tribunal and will be up to 90 days, beginning on the date on which the first of the proposed dismissals was proposed to take effect or the date of the award, whichever is earlier. This contrasts with the one-off fine of £75,000 for failure to meet obligations under the ICE Regulations, which is payable to the Secretary of State for Trade and Industry rather than the employees.
TUPE
The Transfer of Undertakings (Protection of Employment) Regulations 1981 (the "TUPE" Regulations) implement the Business Transfers Directive 77/187/EC. Anomalies that arose in incorporating the Directive into domestic law were addressed by a new Business Transfers Directive 98/50/EC, the Collective Redundancies and Transfer of Undertakings (Protection of Employment) Regulations 1995, and the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1999. Further revisions have also been introduced by the Business Transfers Directive 2001/23/EC and amendments to the TUPE regulations are expected to come into force in October 2005.
The TUPE Regulations apply whenever a business or undertaking (or part of one) is transferred to a new employer. The courts have given a broad interpretation to the meaning of undertaking to date. It would appear to include those providing healthcare services (Porter v Queen's Medical Centre Nottingham University Hospital), the professional practice of an NHS doctor (Jeetle v Elster) and the activities of a charitable foundation providing assistance to drug addicts (Dr Sophie Redmond Stichting v Bartol). However, the ECJ held in the latter case that organisations whose principal role is to carry out purely public administration functions or to exercise public authority pursuant to public law powers were not "undertakings", even if they carry out some economic activity, where that activity is peripheral or ancillary to the main purpose.
The definition of "undertaking" in the ICE Regulations is "a public or private undertaking carrying out an economic activity". The DTI guidance to the ICE Regulations state that employees of the Crown are covered by the Regulations if they work in an undertaking that carries out an economic activity. The guidance states that schools, colleges, universities, NHS Trusts, and central and local government bodies will be covered under the Regulations if they carry out an economic activity but that, ultimately, it will be for the courts or the Central Arbitration Committee (the CAC) to decide on a case by case basis. It is highly likely that the ICE Regulations will be interpreted by the courts in accordance with the case law that has arisen to date in relation to the TUPE Regulations. The DTI guidance states that, on the basis of the ECJ decision in Henke v Geminde Schiierke and another, the main activities of central traditional government departments concerned with the exercise of public authority, such as legislation, administration and policy, will not be subject to the ICE Regulations. As a result, the DTI guidance states that a Code of Practice (as used in cases of TUPE transfers) is to be drawn up by the Cabinet Office. Local authorities, not covered by the ICE Regulations, will not be covered by the new Code either but the DTI Guidance urges them to adhere to its principles by adopting arrangements suitable to their particular circumstances. In hybrid cases, where a public body both exercises public authority and carries out an economic activity, but where it is not clear if that activity is merely ancillary to its main purpose, the issue will be determined on a case by case basis by the courts or CAC.
Under reg. 10 of TUPE (as amended), the employer of employees affected by the transfer, whether it is the transferor or transferee, must inform all the appropriate representatives of any of the affected employees, long enough before the transfer, to enable consultations to take place between the employer and those representatives concerning the following:
(a) the fact that a relevant transfer is to take place;
(b) when it is to take place;
(c) the reasons for it;
(d) the legal, economic and social implications of the transfer for affected employees; (e) the measures which he envisages taking in relation to those employees (and if no measures are envisaged, that fact); and
(f) if the employer is the vendor, the measures which the purchaser envisages that he will take in relation to those employees who are to be automatically assigned to him on transfer (or if no measures are envisaged, that fact).
Regulation 10(8A) provides that the employer must give each affected employee the information stated above directly, if after the employer has invited employees to elect representatives and they have failed to do so within a reasonable time.
Regulation 10(2A) provides that appropriate representatives are representatives of an independent trade union recognised by the employer or, at the employer's choice, either:
(a) employee representatives elected by the affected employees for this purpose in an election which satisfies the election requirements set out in reg. 10A; or
(b) employee representatives appointed or elected by the affected employees for some other purpose but who have authority from those employees to receive information and to be consulted about the proposed dismissals on their behalf.
Therefore, in electing information and consultation representatives under reg. 19 of the ICE Regulations, the employer could ensure that the requirements of reg. 10A of the TUPE Regulations are also satisfied. This would enable the employer to consult the ICE representatives about TUPE matters and would avoid having to elect further representatives to deal with TUPE matters (the overlap between the TUPE and ICE Regulations is discussed further below). The TUPE Regulations do not specify how many representatives must be elected or the process by which they are to be chosen.
It should also be noted that the EAT in Howard v Millrise Ltd and another recently held that, even where there are no trade union or elected employee representatives, the employer is under a duty to invite their election and, if they are not elected within a reasonable time, the employer is obliged to give "each affected employee" the information specified in reg. 10(2) directly.
As with the ICE Regulations and the collective redundancies provisions, employee representatives are protected against dismissal or being subjected to any detriment by the Employment Rights Act 1996 (ERA), ss.103 and 47 respectively, and are entitled to time off to carry out their activities (ss.61-63 ERA). As noted earlier, these rights are wider than those afforded under the ICE Regulations as they also allow election candidates to have time off.
Further, under reg. 10(6A) of the TUPE Regulations, the employer must allow the appropriate representatives access to the affected employees and shall afford to those representatives such accommodation and other facilities as may be appropriate to carry out their function. Regulation 10(2) imposes a duty to inform only. The duty to consult arises under reg. 10(5) where an employer envisages that he will take "measures" in relation to any affected employees. In these circumstances, the employer must consult the appropriate representatives with a view to seeking their agreement on the proposed measures. The measures must be definite plans or proposals that would not have happened but for the transfer, not mere hopes or possibilities. Regulation 6 provides that, in the course of consultation, the employer should consider and reply to any representations made by the appropriate representatives and, in so far as any of the representations are rejected, state the reasons why.
There is a significant limitation to the application of the TUPE Regulations in that they only apply to the transfer of one undertaking from one legal person to another. They do not apply to sales or transfers of shares in a company that carries on the undertaking because the legal entity who incurs the obligations of an employer towards the employees of the undertaking does not actually change and continuity is unaffected (other than in cases of "hiving down" in insolvency). Although only the economic control of the undertaking may change under a share sale, there may still be implications for the futures of the existing employees. Nonetheless, no obligation to inform or consult arises under the TUPE Regulations in these circumstances. However, it is arguable that a share sale would still amount to "category (a) or (b) information" upon which the employer would be obliged to consult under the ICE Regulations. As explained in part one of this guidance note in The ICE Regulations: part 1: category (a) information relates to consultation in respect of the recent and probable development of the undertaking's activities and economic situation. Category (b) information relates to anticipatory measures and threats to the structure and probable development of employment.
However, the duty to consult under the TUPE Regulations can be considered wider than the ICE Regulations in one respect. The employees do not have to be employed in the undertaking or part of the undertaking to be transferred. The duty to inform and consult covers any employee who may be affected by the transfer or may be affected by measures taken in connection with it.
There is no "trigger" to begin consultation contained in the TUPE Regulations. Regulation 10(2) merely states that the appropriate representatives shall be informed of the specified facts "long enough" before any relevant transfer to enable the relevant employer to consult with the appropriate representatives. However, there is no legal duty to consult unless the employer envisages that it will be taking "measures" in connection with the transfer (reg. 10(5)). The High Court in Institute of Professional Civil Servants and others v Secretary of State for Defence stated that the phrase meant that information must be provided as soon as measures are envisaged and, if possible, consultation should also begin "long enough" before the transfer.
If an employer fails to inform or consult, then a complaint may be made by the trade union representative, employee representative or affected employee to the employment tribunal. Where a complaint succeeds, the tribunal will make a declaration to that effect and may order the employer to pay up to 13 weeks' pay for each affected employee (reg. 11(11)). Again, this contrasts with the one-off fine of £75,000 payable under the ICE Regulations.
Regulation 10(7) does provide the employer with a defence, if it can show that there were "special circumstances", which made it not reasonably practicable to inform or consult, provided that the employer can show that he took whatever steps to inform or consult as were reasonably practicable in the circumstances. Looking at the use of this "special circumstances" defence in collective redundancy situations, as in Middlesbrough BC v TGWU, it seems unlikely to succeed unless the employer can clearly show that the failure to inform or consult was as a result of an expedited transfer because of a sudden and unforeseen emergency.
Collective bargaining disclosure
Section 181 of TULR(C)A imposes a further duty on an employer to disclose information for collective bargaining purposes to independent trade unions, recognised by the employer, in relation to matters in respect of which the union is recognised by the employer. Under s.181(2) an employer must disclose information:
(a) without which a union would be materially impeded in collective bargaining; and
(b) which it would be in accordance with good industrial relations practice to disclose.
Accordingly, the Acas Code of Practice, "Disclosure of information to trade unions for collective bargaining purposes", was issued. The Code lists examples of the sorts of information that could be relevant for disclosure, such as:
However, s.182(1) provides that employers are exempted from supplying some information, for example information that it would be illegal to disclose, has been communicated to the employer in confidence, or that would cause substantial injury to the undertaking for reasons other than its effect on collective bargaining. The Code gives examples of information, which if disclosed in certain circumstances, could cause substantial injury, such as, cost information on individual products, marketing or pricing policies and the make-up of tender prices. Further, s.182(2) provides that the employer does not have to disclose:
This would seem to be a higher and more specific threshold of exemption for the employer as compared with the right to withhold any information, which could be "prejudicial" to the company's interests under the ICE Regulations.
Failure to disclose appropriate information under TULR(C)A can lead to a complaint to the CAC by the trade union. The CAC may then refer the matter to Acas for conciliation or hear the complaint itself. If the complaint is well founded, the CAC may issue a declaration to that effect, specify the information that should be disclosed and set a timetable for disclosure. If the employer still fails to disclose the information, the union can complain to the CAC again and request improvements in terms and conditions to be incorporated into the relevant contracts of the employees. They may reflect the improvements that the union would have hoped to achieve through collective bargaining, had the employer not withheld the requested information. If the complaint is upheld, CAC may make an award for the improvements requested by the union or other terms and conditions that it considers appropriate. These new terms then become an implied term of the individual's contract of employment (s.185). This penalty is far more serious than the one-off £75,000 fine payable under the ICE Regulations.
European Works Councils
These consultation arrangements bear the closest resemblance to the ICE Regulations, albeit that the latter apply on a national rather than a transnational level. The aim of the European Works Council Directive 94/45/EC is to improve the right to information and consultation of employees in businesses operating at the European level. It relates to undertakings or groups of undertakings with at least 1,000 employees across the member states of the European Economic Area (EEA) and with at least 150 employees in each of two or more of those member states. It requires the establishment of a European Works Council (EWC) or some alternative form of transnational information and consultation procedure. The Directive requires that central management must meet at least once a year with the EWC in order to consult and provide information, on the basis of a report drawn up by management. The information disclosed should relate to the economic and financial situation of the business, the probable development of the business, trend of investment and employment, substantial changes concerning the organisation, new working methods, mergers, transfers of production, closures or collective redundancies. The EWC Directive is implemented in the UK by the Transnational Information and Consultation of Employees Regulations 1999 (the TICE Regulations).
An EWC agreement is drawn up in accordance with the TICE Regulations after negotiations between management and employees. In common with the ICE Regulations, the process is "triggered" at the management's initiative or on request in writing by at least 100 employees (10 employees in the case of the ICE Regulations) or their representatives in two or more member states, and where no request is received or management does not initiate the process, there is no obligation to start negotiations or to set up an EWC.
The Regulations provide that, after a request has been made or at the management's initiative, a Special Negotiating Body (SNB) must be established to negotiate the EWC Agreement, or some alternative form of transnational information and consultation procedure. The Regulations do not apply to undertakings that had already set up voluntary agreements providing for the transnational information and consultation of the employees and which covered the entire workforce in the EEA. Such agreements, known as art. 13 agreements, had to have been concluded by 22 September 1996 or 15 December 1999, depending on whether the undertaking was subject to the original or extension Directive.
If management refuses to negotiate within six months of receiving an EWC request, or if the parties fail to conclude a transnational information and consultation procedure within three years, the "statutory model" set out in the Schedule to the TICE Regulations will apply. This "default model", like many parts of the TICE Regulations, is reminiscent of the standard provisions, which apply if the employer and employee representatives fail to agree a negotiated agreement within six months under the ICE Regulations.
Enforcement and compliance is through the CAC and the EAT, as is the case under the ICE Regulations. Generally speaking, the CAC will hear disputes as to whether an undertaking is subject to the Directive and procedures leading to the establishment of an EWC. The EAT hears disputes about the operation of the EWC or its non-establishment, and appeals on points of law from the CAC. As with the ICE Regulations, the EAT can impose a financial penalty of £75,000 where the employer acts in breach of its obligations under the TICE Regulations. Both the CAC and the EAT can refer cases to Acas (reg. 39).
As under the ICE Regulations, reg. 23 of the TICE Regulations imposes a statutory duty of confidentiality upon EWC members, information and consultation body representatives and experts assisting the bodies, not to disclose any information given to them by management in confidence. Regulation 24 provides that information that may be objectively regarded as prejudicial to business interests need not be disclosed. Where there is a dispute over the information being withheld, EWC members can appeal to CAC.
The European Commission review of the European Works Councils Directive commenced in April 2004. In preparation for this, the DTI sought the views of business/business representative organisations, legal groups and trade unions. In July 2003, the DTI published a discussion document and in May 2004 published a consultation document, both dealing with the UK experience of European Works Councils (both available at www.dti.gov.uk).
In summary, the consultation exercise revealed, on the positive side, a general acknowledgement that the EWCs had facilitated better communication of important, strategic messages and helped manage change across the undertaking at the trans-European level. The research collated by the government, from various sources, identified better cross-business coordination among management and the EWCs were seen as a valuable mechanism to test out ideas and obtain helpful feedback. It was also seen as a useful tool for networking with EU counterparts who might be better informed about the company.
On the other hand, some participants believed that their EWCs added more symbolic than substantive value. It transpired that most EWCs would typically hold one or two meetings a year to discuss matters such as top-level company strategy and specific operational matters such as new technology, policy and changes to working methods. The meetings tended to be formal affairs at which management would make presentations, without much dialogue. This led to reduced degrees of employee enthusiasm to participate. Employers also expressed their difficulties in getting employees engaged in matters that do not have an obvious impact on their workplace. Consultation was also hindered by the sense of "competition" between representatives from varying member states.
The EWC procedure appears to mirror the ICE Regulations, particularly in terms of the "trigger" mechanisms, default arrangements in the absence of an agreement, confidentiality, enforcement and compliance. The ICE Regulations were originally colloquially known as the National Works Council Directive; it remains to be seen whether they will suffer from the same shortcomings as their transnational counterparts.
Societas Europaea
A further form of information and consultation obligation arises as a result of the European Regulation on the statute for a European Company (SE Regulation), which came into force on 8 October 2004. This allows companies operating in a number of member states to form an SE (by merger, forming a holding or subsidiary SE, or by transforming a single company (which has had a subsidiary in another member state for at least two years)), to be governed by a uniform legal framework and avoid problems of divergence in the law across the member states in which they operate. UK Regulations - the European Public Limited Company Regulations 2004 (the European Company Statute or ECS) - were introduced to provide penalties for contravention of the SE Regulation. These Regulations also implement the SE Directive 2001/86/EC, which sets out the employee involvement arrangements for an SE, which may include employee participation on the board of the SE.
In a similar fashion to the TICE Regulations and the ICE Regulations, the emphasis is on encouraging voluntary agreement on the information and consultation arrangements to be created, while providing a set of default provisions, to apply in the event of agreement not being reached (for further details on the establishment of information and consultation mechanisms in European Companies, see our guidance note in Employee consultation (2): TUPE and other legal duties to consult). The information and consultation obligations imposed by the ECS are likely to be fulfilled in many cases by arrangements already established with the representatives in place for the purposes of the TICE or ICE Regulations: reg. 27 of the ECS simply requires a "representative body", or "one or more information and consultation" procedures to be established. Further, similar provisions to those in the TICE and ICE Regulations are also found, providing protection from detriment or dismissal for employees involved, and providing for enforcement through the CAC and EAT and a maximum £75,000 penalty for breach of the obligations.
Health and safety
Under the Health and Safety Act 1974, the employer must consult employees about any measures that may substantially affect the health and safety of the employee, and the arrangements for appointing or nominating representatives. Non-compliance can result in fines.
If an employer recognises a trade union that has appointed, or is about to appoint, safety representatives under the Safety Representatives and Safety Committees Regulations 1977 (the SRSC Regulations), then the employer must consult those safety representatives on matters affecting the employees they represent. The groups of employees represented may include people who are not members of that trade union. Regulation 4A sets out the employer's duty to consult safety representatives in good time. The issues about which an employer must consult include:
Employers do not have to provide information that they are not aware of or if it would be against the interests of national security, against the law or it would harm the business (other than for reasons of its effect on health and safety). Neither is the employer obliged to provide information about an individual who has not consented to it or if the information is related to legal proceedings. (TULR(C)A, s.182 (1).)
Regulation 4(2) provides that an employer must permit a safety representative to take time off with pay to perform his functions and to undergo training. Candidates for election are also entitled to reasonable time off with pay.
Regulation 4A(2) also provides that the employer should provide facilities and assistance as may be reasonably required to enable the safety representatives to carry out their function.
The Health and Safety (Consultation with Employees) Regulations 1996 (the HS(CE) Regulations) provide for consultation by the employer with those employees not covered by safety representatives appointed by a recognised trade union. The employer can consult with them directly or through elected representatives.
The HS(CE) Regulations 1996 gives elected representatives of employees the following roles:
to raise concerns with the employer about possible risks and dangerous events in the workplace;
Regulation 3 states that consultation must be in good time, which means that the employer should provide the employees or their elected representatives with all the necessary information and give them time to discuss the matter and express their opinions before a decision is reached.
Regulation 5 requires the employer to provide such information as is necessary to enable employees or their representatives to participate fully and effectively in consultations.
Regulation 7 provides that an employer must permit elected representatives to take time off with pay to perform his functions and to undergo training. The employers must also pay all reasonable costs associated with necessary training for elected representatives, including travel expenses. Candidates for election are also entitled to reasonable time off with pay.
Regulation 8 protects the elected representatives from suffering any detriment or being unfairly dismissed in connection with anything reasonable that they do or propose to do in connection with health and safety consultation.
Employers may have to establish a dual system under the SRSC Regulations 1977 and the HS(CE) Regulations 1996 and it is important to coordinate the systems properly. The Regulations and Codes of Practice provide a framework of rights and obligations to enable safety representatives and committees to operate in the workplace, and specific arrangements can be agreed between the employer and employees.
Disagreements between employers and employees about consultation arrangements may be handled via Acas. If an employee feels penalised for exercising his rights as a safety representative, he can also apply to the employment tribunals.
Pensions
There are various duties to consult imposed on employers in relation to occupational pension schemes. The Pensions Act 1995 requires the disclosure of auditing and accounting information to members, their spouses, their beneficiaries and recognised trade unions.
The Occupational Pensions Schemes (Disclosure of information) Regulations 1996 SI impose on pension scheme trustees an obligation to provide information about a range of matters, such as the constitution of the scheme, membership, contributions, tax status, pensions increases or transfers or when benefits become payable on resignation.
The Occupational Pensions Scheme (Contracting-out) Regulations 1996 require an employer who intends to establish a contracted-out scheme to issue notices to employees and any recognised union in writing. The notices should provide information about the date of the contracting-out, contributions and benefits under the scheme and any proposed changes and contact details of those to whom representations can be made. The employer is then required to consult on all these matters.
The Pensions Act 2004 received royal assent on 18 November 2004. It is due to come into force in stages commencing on 6 April 2005. Under this Act, employers running occupational pension schemes will have to consult members before they make any major changes to the scheme. Further, employers running personal pension/stakeholder schemes where there is a direct payment arrangement will also have to consult. A direct payment arrangement is where the employer deducts contributions from the employee's pay for payment into the scheme or where the employer makes a contribution. Regulations will prescribe further detail about the consultation obligations in due course.
Companies Act 1985
Companies employing more than 250 people are required by the Companies Act 1985 to include a statement in their director's report describing the action taken in the previous financial year among other things, to introduce, maintain or develop arrangements aimed at:
OVERLAP WITH OTHER CONSULTATION PROVISIONS
One of the concerns raised by employers during the consultation process leading to the ICE Regulations related to the overlap between them and the various existing statutory duties to consult as discussed above. The DTI consultation document on informing and consulting employees, published in July 2003, reiterated that the EU Information and Consultation Directive (2002/14/EC) was intended to bolster existing information and consultation requirements and to give workers additional protection. Article 9 of the Directive 2002/14/EC is expressed as being without prejudice to the duties to inform and consult set out in Council Directive 98/59/EC on collective redundancies, Council Directive 2001/ 23/EC on transfers of undertakings and Council Directive 97/74/EC on establishing European Works Councils.
During the consultation process, employers were therefore concerned that they may have to consult various groups on the same issue and clarification was sought on which legislation would take "priority". In response, reg. 20(5) was included. It states that, where employers are subject to the standard information and consultation requirements and are also obliged to consult under TUPE or in respect of collective redundancies, employers are relieved of their obligations to inform and consult under the ICE Regulations. Under reg. 20(5), where an employer is contemplating "substantial changes in work organisation or in contractual relations", the employer must then notify the information and consultation representatives in writing that it will be consulting in compliance with its duties under TULR(C)A or TUPE instead.
Notification has to be given on each occasion the employer becomes subject to the duties under TULR(C)A or TUPE. The DTI Guidance on the ICE Regulations also states that employers who are subject to the standard provisions may make use of the exemption as and when they become subject to the collective redundancies or TUPE legislation. In effect, the employer can continue to inform and consult with the ICE representatives under the standard provisions over matters that may lead on to, but have not yet become, a collective redundancy or business transfer situation covered by the relevant legislation.
In relation to pre-existing and newly negotiated agreements, employers and employees can simply agree to adopt the approach allowed under reg. 20(5), or they can agree to include an express provision with a view to avoiding any overlap with the existing statutory obligations by expressly excluding collective redundancy and business transfer situations from the negotiated agreement altogether.
With regards to the relationship between the ICE Regulations and European Works Councils, the DTI Guidance makes it clear that, unlike collective bargaining agreements, EWC agreements are not valid pre-existing agreements for the purpose of reg. 8. The Guidance states that although agreements establishing EWCs (pursuant to the TICE Regulations) might meet the criteria for pre-existing agreements in reg. 8(1), they would not be appropriate as their focus is on "transnational" issues.
In any event, "information and consultation" does not appear to be specifically defined in the EWC Directive. Although the EWC Directive makes provision for information and consultation meetings, there is no real provision which states that the EWC must be given time to examine the information and meet management "with a view to reaching agreement". In the absence of these factors, it is debatable whether an EWC will be able to influence an employer in the way currently envisaged by the ICE Regulations. It is possible that national level consultation in the form of the ICE Regulations will end up taking precedence over European level consultation.
Another point that was asserted during the process of the government's consultation over the EWC Regulations (in anticipation of the European Commission's review of the EWC Directive 94/45/EC) was that the UK EWC representatives were not as skilled as their European Counterparts in "the art of representation". In response, the government opined that the implementation of the ICE Regulations would lead to an overhaul of consultative and representative structures in UK companies which in turn would lead to an increase in the skills and experience of employee representatives that may have a positive impact on related mechanisms, like EWCs. The government also felt that the ICE Regulations might help to bridge the gap between employee representation at European and national level.
A number of issues concerning the impact of the ICE Regulations on the trade unions arose during the consultation process. The first issue concerned the overlap between the ICE Regulations and collective agreements. Many employers already have collective agreements with trade unions in place, which require information and consultation on the majority of the matters required under the ICE Regulations anyway. Accordingly, collective agreements can be valid pre-existing agreements if they meet the criteria set out in reg. 8(1).
However, not all employees will be members of the trade union and, further, a collective agreement only applies to a "bargaining unit" and will not necessarily cover all the employees in an undertaking. The ICE Regulations impose a legal obligation to have information and consultation requirements in place to cover all employees, where requested. If an employer does seek to rely on a collective agreement as a pre-existing agreement, then the employer must also ensure that there are one or more other valid pre-existing agreements, which cover the remainder of the employees.
Some may see the ICE Regulations as an opportunity for employers to bypass existing union structures and dilute their influence. For instance, where there is a valid pre-existing agreement (including a collective agreement with a union), employers can still negotiate a new agreement under the provisions of the ICE Regulations, thereby introducing separate information and consultation arrangements covering all their employees, regardless of their collective agreements with the unions.
Despite the initial concerns of the unions that employers could set up alternative mechanisms to inform and consult with employees even where there already are existing arrangements with the unions, the government did not specifically exclude this possibility from the final draft of the ICE Regulations.
However, the unions are unlikely to have any real need for concern that the collective agreements/mechanisms will be "ousted" by the new Regulations. The DTI Guidance does make it clear (at para. 25) that there would be no legal effect on a pre-existing agreement if the workforce endorses an employee request to negotiate a new information and consultation agreement in addition. The employer would come under an obligation to negotiate a new ICE agreement but the pre-existing agreement would continue in force. It would simply mean that the pre-existing agreement would not suffice as a means of fulfilling the employer's obligations under the ICE Regulations following an employee request for a new ICE agreement.
Employers, who have a good relationship with a union and an adequate information and consultation mechanism in place, may prefer to continue to work with the union, using the ICE Regulations as an opportunity to consolidate and streamline union and non-union consultation facilities. Further, in relation to TUPE and collective redundancies, employers can simply notify ICE employee representatives that it is consulting the union instead.
A second issue, raised by the TUC during the consultation process, concerned whether a procedure established under the ICE Regulations could prevent an application for recognition by a trade union. As discussed above, a collective agreement which satisfies the criteria in reg. 8 could stand as a pre-existing agreement for the purpose of the ICE Regulations and vice versa. However, TULR(C)A 1992, Schedule A1 paragraph 35 provides that an application to the CAC for recognition under the statutory procedure will not be entertained if the CAC is satisfied that there is already a collective agreement in force under which a union is recognised as entitled to conduct collective bargaining on behalf of any workers falling within the relevant bargaining unit. The TUC was concerned that an agreement under the ICE Regulations could be viewed as a "collective agreement". This could block applications for statutory recognition and hinder the collective bargaining process.
There are no explicit provisions concerning trade unions in the Regulations. However, s.178 of TULR(C)A defines a "collective agreement" as "any agreement or arrangement made by or on behalf of one or more trade unions and one or more employers organisations" which relates to matters such as "machinery for negotiation and consultation, and other procedures". "Collective bargaining" means "negotiations relating to or connected with" matters such as "machinery for negotiation and consultation, and other procedures".
The TUC acknowledged that there were unlikely to be difficulties presented by agreements reached under the ICE Regulations in this respect, as ICE employee representatives will not normally amount to a trade union. Even if they do, they are not engaged in "collective bargaining". Indeed, the unions' third concern related to whether the requirement under the ICE Regulations for "consultation with a view to reaching an agreement" could be viewed as collective bargaining or negotiation.
The guidance states that consultation must be more than simply providing information: there must be a genuine and conscientious consideration of the employees' views (see part one of this guidance note in The ICE Regulations: part 1). As discussed above, the DTI Guidance makes it explicitly clear that the obligation to consult under the ICE Regulations is different from negotiation, collective bargaining or joint decision-making.
In short, it might be argued that the ICE Regulations are unlikely to result in the "sidelining" of currently recognised unions, particularly if they already work effectively with the employer. However, it is difficult to see how unions might gain from them, when they do not require any action to be taken at all in the absence of a request, and may simply result in direct communication with the workforce. Where action is taken, it remains to be seen whether the ICE procedures promote, or provide a disincentive for union recognition, particularly the private sector, where the levels of trade union recognition are already low.
LIKELY SOURCES OF DIFFICULTY
A number of potential areas of difficulty may arise out of the new ICE Regulations, thereby reducing their effectiveness in practice. First, some employees fear that the duty to inform and consult will be a sham, as tougher sanctions are needed to ensure that the employers actually do inform and consult in a meaningful manner. As discussed above, the failure to inform and consult in anticipation of collective redundancies and TUPE transfers could result in a penalty of a protective award for each employee over a period which is considered "just and equitable" by the tribunals or a payment of 13 weeks' pay for each affected employee, respectively. In contrast, the £75,000 penalty for failure to consult under the ICE Regulations (payable to the Secretary of State for Trade and Industry) might well prove to be more effective as a form of taxation resulting from systematic "efficient breaches" of the ICE Regulations, than as a means of enforcing the obligation to inform and consult. Article 8 of the Directive states that the sanctions imposed must be "effective, proportionate and dissuasive". It may be that this test is not passed in the domestic legislation. Further, the penalty only applies to negotiated and standard agreements, not to pre-existing agreements. A dispute over a pre-existing agreement could only be resolved in a way provided for by that agreement. The method of enforcement provided for might be even less effective than the £75,000 penalty.
Moreover, the introduction of a parallel information and consultation system where only part of the workforce is already covered by a collective agreement, negotiated by the relevant trade union, could prove divisive. Further, it is arguable that the skills of a newly elected employee representative will not compare with a trained trade union official in terms of elucidating relevant information and disseminating it expediently. A dual system could prove difficult to manage and could actually delay the decision-making process, which might be advantageous for the workforce.
In addition, it should be noted that an employer can begin to consult the ICE representatives under the standard provisions over matters that may lead on to, but have not yet become, a collective redundancy or a business transfer. They can then move on to consult trade union representatives under the relevant collective agreement when the situation eventually becomes a collective redundancy or TUPE transfer. This dual approach could lead to misinformation and confusion, causing low morale and/or panic among the workforce. Companies with dual systems and parallel agreements will have to monitor and manage them closely to ensure the relevant information is filtered throughout the workforce evenly and accurately.
Another problem is that reg. 26 of the ICE Regulations allows an employer to withhold any information where the disclosure of such information "would, according to objective criteria, seriously harm the functioning of, or would be prejudicial to, the undertaking". In the absence of a more detailed explanation of what could be considered "prejudicial", employers could exploit this section in order to flout their obligation to reveal certain information.
The "trigger" mechanism process for setting up the consultation arrangements in the first place could give rise to difficulties. Setting up the consultation arrangements may be triggered by the employer or on receipt of a valid request by at least 10% of employees. Experience with European Work Councils to date has shown that there is often a sense of indifference and employee apathy with regards to matters that don't directly and immediately appear to affect employees locally. Employees may also be ill-educated about their employer's duty to inform and consult, as imposed by a European Directive, particularly in workforces where there is no union representation.
The ICE Regulations do not stipulate any particular requirements with regard to the timing or method of consultation. With regard to methods of consultation, employers may simply send a round of emails in order to discharge their duty to inform and consult, thereby putting the information into the public domain as required, but limiting the employee's involvement and the scope for real dialogue. Again, experience of European Works Councils have shown that employers tend to fulfil their duties by simply holding large, formal meetings with all of the representatives, in which management simply make presentations and speeches, thereby prohibiting the opportunity for the employee representatives to present an opinion.
Further, problems could be caused by the fact that there are no express provisions in the ICE Regulations concerning the timing of the consultation, although the DTI Guidance indicates that this should be in advance of any developments affecting jobs and before any irrevocable decisions have been taken. In order to be effective, consultation should be continuous and timely so that the employee representatives can genuinely influence the process. This has to be balanced against the possibility of giving information, particularly bad news, too early and scare-mongering.
Finally, the DTI Discussion document published in July 2003 also discussed the perceived obstacles to developing meaningful dialogue between employer and employee in the workplace, many of which will remain a source of difficulty. For instance, the employees' fear of victimisation for expressing their views and the lack of commitment by management who may see little point in giving employees information about matters of strategic business matters, in which the employees would have little expertise or experience.
In implementing the ICE Regulations, it will be necessary to build up the trust between employees and management and to ensure that adequate training is provided to enable the employee representatives to be able to "unlock" the meaning behind business information and jargon in order to be able to question it and communicate effectively. Management will also need to commit themselves to the "two-way" nature of the consultation process and recognise that they could also benefit from the new Regulations as they will be able to receive feedback from their employees on matters to help inform their decisions. Further, employees who feel that they are actively participating in the strategic direction of the company may feel more loyal towards it.
CONCLUSION
The European Union driven framework for informing and consulting employees over matters such as collective redundancies and TUPE transfers, and providing for European Works Councils and now national information and consultation mechanisms, has established minimum standards of information and consultation, monitored (at national level) by the CAC, and the EAT or Acas. However, the European Works Councils experience has shown that the consultation process can be rather one-sided, with management often simply providing business updates and progress reports. With a penalty for non-compliance that may be regarded as largely inconsequential for many companies, and given the possibility that nothing at all will happen without either side initiating the ICE Regulations' processes, and that (by agreement) the obligations may be fulfilled by direct communication with the workforce, it is difficult to see how the ICE Regulations will have a revolutionary impact upon the world of work.
Since the representatives will not be able to negotiate about pay and conditions (perhaps the matters closest to employees' hearts), as many employees will be unaware of their potential rights, and since agreement need not be reached, it is conceivable that the Regulations will spark little more than a ripple of apathy, meaning that much will depend on the willingness of employers to offer voluntary arrangements capable of constituting valid pre-existing agreements. The least likely workplaces to be apathetic are those that already have a recognised union, so the Regulations may well simply provide organised workforces with a further means of obtaining information, even if not another real cause of action (the fines for non-compliance being payable to the Secretary of State for Trade and Industry). It is therefore difficult to imagine a radical change in the employer-workforce relationship in the private services sector, which traditionally has a low union presence. Nonetheless, the opportunity is presented for employers to consult employee representatives continually in an appropriate forum with two-way communication, and to enable employees to have a proper and strategic view of the company and where the industry is going. Overlapping obligations (including the duties to disclose information for collective bargaining purposes) could be used by employers in a complementary manner to create a comprehensive structure for the informing and consulting of employees. This would require time, effort, and a willingness to understand the benefits of cooperation that could be achieved, and only time will tell whether employers are prepared to make that investment.
SOURCES OF HELP
Managers and employee representatives will need training to enable them to add value to the information and consultation process under the ICE Regulations. The DTI Consultation Document issued in July 2003 (High Performance Workplaces - Informing and Consulting Employees) sets out ways in which assistance to develop the appropriate information and consultation mechanisms can be provided:
Acas provide training and advice as well as a conciliation service for employers and employees seeking to reach an agreement on information and consultation under the new legislation. Further information can be found on www.acas.org.uk.
This article was written by Ruth Selo and Evelyn Nwajei.
CASE LIST
Betriebsrat
der Bofrost * Josef H Boquoi Deutschland West GmbH & Co KG v Bofrost* Josef
H Boquoi Deutschland West GmbH & Co KG
[2001] IRLR 403
Dr Sophie Redmond Stichting v Bartol [1992] IRLR 366 ECJ
GMB v Man Truck & Bus UK Ltd [2000] IRLR 636
Henke v Gemeinde Schierke [1996] IRLR 701 ECJ
Howard v Millrise Ltd and another [2005] IRLR 84
Institute of Professional Civil
Servants and others v Secretary of State for Defence [1987] IRLR 373
Jeetle v Elster [1985] ICR 389
Middlesbrough Borough Council v TGWU [2002] IRLR 332
MSF v Refuge Assurance plc [2002] IRLR 324
Porter v Queens Medical Centre
(Nottingham University Hospital) [1993] IRLR 486
HL
R v British Coal Corporation &
Secretary of State for Trade & Industry ex parte Price [1994] IRLR 72 HC
